Suppose That, at the Current Level of Output, a Firm

question 36

Multiple Choice

Suppose that, at the current level of output, a firm in a perfectly competitive market is producing at a level such that price exceeds marginal cost, P > MC. Marginal cost is normally shaped (U-shaped) . The firm:

• A)is currently maximizing profit since it is charging a price higher than marginal cost.
• B)could increase profit by lowering the level of output.
• C)could increase profit by increasing the level of output.
• D)cannot increase profit without raising price.

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Definitions:

Trade Deficit

A situation where a country's imports of goods and services exceed its exports of them.

Peso Price

The value of a good or service expressed in pesos, the currency of various Latin American countries.

Exchange Rate Appreciation

Exchange rate appreciation refers to the increase in value of one currency relative to another, meaning you need fewer units of the appreciating currency to buy one unit of another currency.

Domestic Deflation

A decline in the general price level of goods and services within a domestic economy over a period of time.